5 Life Insurance Riders to Consider
The main component of life insurance is the death benefit, which pays out a substantial lump sum to beneficiaries if you pass away with an active policy. However, every policyholder has different circumstances they need to account for. That’s why insurers offer a variety of life insurance riders, or policy add-ons you can buy to tailor your coverage to your needs. This article will explore five types of life insurance riders to consider if you want to customize your life insurance coverage.
1. Inflation rider
Inflation riders increase your death benefit by a fixed percentage, such as 5%, every year. This can help you guard your death benefit against losing value to inflation. Additionally, if inflation is low, the inflation rider can help grow your death benefit to provide more to your loved ones. Inflation riders increase your premiums, but you can save thousands of dollars from the effects of inflation. Plus, inflation reduces the value of your premiums every year. For instance, if you pay $5,000 per year for a permanent life insurance premium with an inflation rider, that $5,000 will be worth less next year, helping offset the inflation rider’s cost.
2. Return of premium rider
Many term life insurance policies last for 10 to 30 years, so the policyholder may risk outliving the policy and losing the premiums they paid. A return of premium rider prevents this. If you purchase a return of premium rider and outlive your term life insurance policy, the insurer will refund you all premiums paid. You’ll pay higher premiums, but if you’re confident you’ll outlive the policy, the extra cost can be worth it.
3. Child insurance rider
A child insurance rider pays out a death benefit if one of your children passes away while the policy is in force. This can help pay for funeral expenses and related costs, easing the financial burden while you grieve. Children do not have to take a medical exam for these riders, but you may have to provide some of their medical information to the insurer.
4. Long-term care rider
A long-term care rider lets you access some or all of your death benefit while alive if you experience a qualifying illness or injury. You can use the death benefit while alive to cover long-term care costs, such as home healthcare workers or caregivers, long-term care facilities, or nursing home expenses.
5. Family income benefit rider
A family income benefit rider pays your beneficiaries a fixed monthly income stream if you pass away while the policy is in force. It resembles a paycheck, helping your beneficiaries replace your income.
These riders can work well for policyholders who are the sole earners in their families or are worried their beneficiaries can’t manage a large lump sum death benefit. The insurer pays this to your beneficiaries on top of your death benefit, so you may pay slightly higher premiums.
Customize your life insurance coverage with riders
Life insurance providers offer many types of riders to customize your coverage if you pass away. Inflation riders guard your death benefit against inflation, while return of premium riders get you your premiums back if you outlive the policy. Some riders even let you access benefits while alive. The child insurance rider can help cover funeral costs if a child passes away, whereas the long-term care rider can help you pay for illness and injury costs.
Rider availability and costs can vary by insurer. Shop around to find out which insurers offer the coverage and riders you need within your budget.